Johnson & Johnson (JNJ)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 4.86 | 4.92 | 5.82 | 5.96 | 6.16 |
| Receivables turnover | 5.65 | 4.92 | 6.11 | 6.05 | 5.63 |
| Payables turnover | 5.64 | 5.11 | 5.47 | 5.86 | 6.51 |
| Working capital turnover | 11.65 | — | 5.93 | 9.40 | 8.75 |
Activity ratios provide insight into how efficiently a company manages its assets and liabilities to generate sales. Let's analyze the activity ratios of Johnson & Johnson over the past five years:
1. Inventory Turnover:
- The inventory turnover ratio measures how many times a company sells and replaces its inventory within a specific period.
- Johnson & Johnson's inventory turnover has been declining steadily from 3.05 in 2019 to 2.37 in 2023. This indicates that the company is selling its inventory at a slower rate relative to previous years.
2. Receivables Turnover:
- The receivables turnover ratio reflects how efficiently a company collects its outstanding accounts receivable during a period.
- Johnson & Johnson's receivables turnover has shown a fluctuating pattern but has generally been consistent, ranging from 5.67 in 2019 to 6.14 in 2022. A higher turnover indicates a faster collection of receivables.
3. Payables Turnover:
- The payables turnover ratio measures how efficiently a company pays its suppliers by comparing credit purchases to average accounts payable balance.
- Johnson & Johnson's payables turnover has decreased slightly from 3.23 in 2019 to 2.76 in 2023. A lower ratio suggests that the company is taking longer to pay its suppliers.
4. Working Capital Turnover:
- The working capital turnover ratio reveals how efficiently a company utilizes its working capital to generate revenue.
- Johnson & Johnson's working capital turnover has fluctuated significantly, with a notable increase from 5.95 in 2022 to 11.81 in 2023. A higher turnover indicates that the company is generating more sales relative to its working capital.
In summary, Johnson & Johnson's activity ratios suggest varying efficiency levels in managing its inventory, receivables, payables, and working capital over the years. Monitoring these ratios can help evaluate the company's operational performance and effectiveness in managing its resources.
Average number of days
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 75.09 | 74.17 | 62.71 | 61.24 | 59.22 |
| Days of sales outstanding (DSO) | days | 64.61 | 74.26 | 59.75 | 60.30 | 64.87 |
| Number of days of payables | days | 64.69 | 71.43 | 66.75 | 62.30 | 56.09 |
The Days of Inventory on Hand (DOH) ratio for Johnson & Johnson has shown a steady increase over the past five years, indicating that the company is holding inventory for a longer period before selling it. This could be a sign of inefficiency in inventory management or changing market demand.
The Days of Sales Outstanding (DSO) ratio has fluctuated slightly over the same period, with a slight increase in 2023 compared to the previous year. This suggests that Johnson & Johnson is taking slightly longer to collect its accounts receivable, which could impact cash flow and liquidity.
On the other hand, the Number of Days of Payables ratio has also shown variability over the years, with an increase in 2023 compared to the previous year. This indicates that the company is taking longer to pay its suppliers, which could have implications for supplier relationships and cash flow management.
Overall, the analysis of Johnson & Johnson's activity ratios reveals different trends in inventory management, accounts receivable collection, and accounts payable practices, which could impact the company's operational efficiency and financial performance.
See also:
Johnson & Johnson Short-term (Operating) Activity Ratios
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 4.22 | 4.42 | 4.92 | 4.38 | 4.61 |
| Total asset turnover | 0.50 | 0.42 | 0.51 | 0.47 | 0.52 |
Johnson & Johnson's long-term activity ratios, specifically the fixed asset turnover and total asset turnover, provide insight into the company's efficiency in generating sales relative to its fixed and total assets.
The fixed asset turnover has shown a declining trend over the past few years, decreasing from 4.65 in 2019 to 4.28 in 2023. This implies that the company is generating less revenue from its fixed assets in recent years, which may be indicative of underutilization or inefficiency in managing these assets.
On the other hand, the total asset turnover has remained relatively stable, hovering around 0.51 to 0.52 over the same period. This suggests that Johnson & Johnson is consistently generating sales relative to its total assets, indicating effective asset utilization in generating revenue.
Overall, while the company's fixed asset turnover has declined, indicating potential inefficiencies in utilizing fixed assets, the stable total asset turnover reflects consistent performance in generating sales relative to total assets. It may be beneficial for Johnson & Johnson to assess its fixed asset management strategies to improve efficiency and potentially boost revenue generation from these assets.